THOUGHTS ON “HUME’S MULTILATERAL ADJUSTMENT MECHANISM”
Susan Morris APRIL 5, 2015 AT 2:15 AM Thanks JC. There are still two things I don’t understand about this transition:
1) How can the tertiary economy still take precedence over the primary economy, i.e. the world’s natural resources. The way I see it, no matter how much we play with numbers, we’re still ruining the real economy, which is the ecology;
2) How can we even consider a Nation’s assets, when so much has been privatised? I have not seen this issue addressed
A lot of people are going to be upset if your predictions about gold are true.
Jose Johnson APRIL 5, 2015 AT 3:41 AM Thanks again for clarifying the mechanisms by which the SDR will transition, the Hume mechanism and MEER.
The only question I have is how will the landscape of the developed countries aka US, Europe, Canada etc look like in a few years as this happens ?
Will manufacturing and true job creation even be a possibility?
It seems like the advanced economies are peaking in a lot of parameters involving economic and population growth, debt to GDP ratio, number of retirees to working population whereas the developing ones are not having some of those issues at least not to the extent.
In the US the massacre from an economic standpoint is so great that I think everyone who thinks they are going to actually retire must be smoking ganja. I see retirement for me as death when life takes what it has given me back.
cassiefoley911 APRIL 5, 2015 AT 5:35 AM I can’t speak for your 2 points but I do believe the issue regarding gold is true. I believe there will be a spike, to how large a spike I believe depends on whether there will be a panic or not. But when the dust settles gold will fall dramatically.
Mike Maloney from hidden secrets of money.com goes into this quite a bit. Apparently when it rises is when you cash it in or convert it to another asset, knowing when is what you pay him for by subscribing.
Cramley APRIL 5, 2015 AT 12:03 PM That’s not really how gold behaves, not the normal price spike and crash. If you have already bought you’ll be ok.
The equilibrium point after the big short squeeze will be much higher than recent prices. Centrals Banks, think the BuBa and PBoC, will always have a bid to put a floor on the price of gold, much as the ESF has always had a bid under the current reserve asset, USTreasuries.
Keep a close eye on Germany. Together with the Chinese it will be the driving force behind this new currency system set to unfold and a high gold price in terms of RMB will be a huge tailwind in the effort to internationalize the RMB.
Gold revaluation will be the next form of QE, what should ave been done in the first place. Instead of rolling over NPLs , the liquidity will go towards real development of the economy and helicopter drops for the deleveraging of the private sector.
Remember, it’s debt saturation that is the problem. The current reserve asset is down to its last telomere and entering apoptosis. Merely repacking said reserve asset as a different debt instrument won’t solve the financial equation.
Revaluing gold is the central bankers’ way of rolling over unpayable debt. Afterwards the nominal price of gold will be very unexciting.
cassiefoley911 APRIL 5, 2015 AT 7:20 PM Hi, thank you for your reply. 4 years ago my daughter bought her house and on my advice, instead of putting $20,000.00 extra on her house she bought gold & silver. Now I worry it may have been the wrong advice. Cheers
Susan Morris APRIL 5, 2015 AT 1:33 PM Thanks Cassie
cassiefoley911 APRIL 5, 2015 AT 7:26 PM Your welcome
smifg APRIL 5, 2015 AT 8:44 AM Thoughtful & inspiring post as always, JC. I agree with some of the general themes (e.g. moving to a SDR world thus lifting the Triffin burden from national currencies, tomorrow´s SDR is as fiat as today`s currencies, USD will not collapse etc.)
“Gold in the multiples of hundreds”:
Not very possible, IMO. Oil went south, so did other (mining) commodities but Gold. They manufactured QE to prepare the world for SDR.
As long as they keep inflating the monetary base to pursue their SDR ponzi as long will Gold be a hedge against it. Ordinary people are not stupid.
They might not understand what`s going on within the financial world but they do so see something is wrong. NIRP, ZIRP etc. Their safe harbor is precious metals.
Even Yellen recently admitted “currency is not a good store of value”. Apart from that, it`s an open secret that China`s gold reserves are much higher than the official numbers. They are not buying gold in the USD 1100-1200 range just to have their wealth cut by two thirds a few years later.
Any chance that the SDR concept might fail due to the European Monetary Union (=Euro) break up? Or will that just translate into a delay because the SDR basket needs to be re-negotiated?
Unreasonablescot APRIL 5, 2015 AT 9:58 AM JC Your insight and explanation joins up all the dots to make it understandable!
Add the release of the Historical Bonds funds and the clever re-distribution of wealth in the expected currency revaluations (the real scam was calling it a scam!) and we have real hope for a settled world where economic wealth can be created by the people for the people….
The structure as you describe has been well thought out and are we surprised based upon 18th century thinking!
‘ Nothing really changes; human nature with its weaknesses and in particular greed for power and personal wealth at any cost (including wars) often ignore the best for all. And now 3 centuries on we see such a move to achieve the benefits you describe. ‘
It will, I am sure, be a long journey but well done the Chinese for persisting to see the required changes now being implemented.
Dripfood APRIL 5, 2015 AT 2:11 PM Seems Iceland is the first nation to openly discuss the return to Friedman’s POMF model.
Safety Fishnet (@SafetyFishnet) APRIL 5, 2015 AT 9:39 PM Wow, beautiful catch dripfood, maybe that’s why Iceland has been portrayed as the proud small nation standing up to the globalist bullies for years.
Wonderful place to start this experimentation and widen the practice later.
I remember the G30 paper J.C shared and both of your excellent analysis of it. IMF as an SDR exhange maker, lessened need for forex reserves (thus national currencies), deleveraging and minimizing the side effects of the process with POMF model,
using nominal GDP as a more widespread anchor than inflation rate, downsizing commercial banks gradually and eventually depriving them of the capability to “create money out of thin air” as most love to put it. ‘
Finally ,attainment of pre-determined growth rates with pre-determined growth in centralized money supply that is to be fed by central banks; ultimate technocracy for the technosexual supranational leaders!!
Peaknikmicki APRIL 5, 2015 AT 2:15 PM Previous articles have been somewhat bullish on gold and links have pointed to papers suggesting revaluation of gold to $6,000 in order to effectively counterbalance some swings within the SDR composition.
With this article the tone has now suddenly become longer term bearish. I really would like to see this further explained. Is the expected depreciation of gold based on the higher spike and the lower price then settles somewhere near say the proposed $6K price or do you see long term price being back to (or lower) current levels?
Secondly, do you have an opinion on why China is accumulating gold? Especially if China is working for a stable SDR based system that isn’t dependent on revaluation of gold, why do you think they are buying so much? (Is it in you opinion only mis-guided speculative private buying?)
JC Collins APRIL 5, 2015 AT 2:44 PM At no time have I written in a bullish manner on gold.
In fact, I deplore the terminology of bull and bear financial symbolism. And I have repeatedly spoken against suggestions and analytical conclusions that gold will revalue upwards by thousands.
You will not see $6000 gold, or $10,000 gold. Period.
There are so many assumptions made regarding gold that any level of accumulation, by any country, or any news about gold in general, is taken as evidence of imminent upward revaluations.
A price for gold will be determined, like under Bretton Woods at $35.00/oz, and will be nowhere near $3000 or any amount higher. After a potential spike of hundreds during the initial stages of the transition, the value of gold will be set somewhere in the $700 -$800 range.
In regards to China, gold accumulation is serving multiple purposes. Some of it involves the private market, some of it involves the honoring of gold backed historical bonds, and some it it may have something to do with converting gold reserves into SDR bonds, with the gold put on loan with the IMF, just like gold was given to America under Bretton Woods.
Finally, it has been specifically stated on this site that the SDR system will be partially dependent on gold, just like Bretton Woods.
Whether gold is added directly into the SDR composition, or the currencies in the composition are partially supported by gold, once again like Bretton Woods, its value will be set at multiples lower than many expect.
I’m simply not telling people what they want to hear, I’m giving them real conclusions built on real analysis, not wishful thinking.
Gold is a great store of wealth, but wealth is not created through unrealistic revaluations of gold. People are dreaming of getting rich quick from absurd claims that gold is going to skyrocket.
This is simply false analytical pandering to the lowest human common denominator which attempts to manipulate a persons inner deficiencies and greed. Same old, same old, and people continue to fall for it.
There is no substitute for hard work which leads to wealth that is earned. Unearned wealth is extremely destructive, and yet, we seek it out through all sorts of fables and wishful thinking.
nanook73 APRIL 5, 2015 AT 4:00 PM JC said, “This is simply false analytical pandering to the lowest human common denominator which attempts to manipulate a persons inner deficiencies and greed.
Same old, same old, and people continue to fall for it. There is no substitute for hard work which leads to wealth that is earned.” Swish! 4 points as JC cuts to the core of the issue. Greed.
This simple statement is at the crux of what ails us as a species. Capitalism is an ethical system so long as it is understood properly. It is extremely vulnerable to greed and corruption and is easily and quickly (at least in the cosmic sense) converted into a type of fascism.
A truly ethical and honest economic system is only possible when its actors (us) become introspective, abandon or at least recognize want, desire and greed and instead embrace service and productivity.
Wealth, spiritually and physically, comes from these two concepts naturally. If we take care of the needs (and even wants) of others in an _honest_ manner with the idea of service/integrity in the forefront of what we do then it is my belief that wealth will naturally follow our labour. Will we get rich?
What is rich? Does the kind of money you would find in a lotto make us rich?
The commercials for Lotto sicken me not because they represent an acquisition of capital that is unearned (certainly luck plays a part in our existence and is not something that should be shunned) but because it represents and abandonment of productivity (either physically or spiritually) and a rejection of our creative capacity and ability to find joy in our work and service towards others.
It emphasizes sloth over industry and leads us to believe/desire that the ends we seek is nothing more than physical pleasure and the lack of “having to do anything”. It embraces laziness.
We believe being ‘rich’ means we can turn off our minds , cease to engage in introspection and simply indulge our physical desires. It is a death spiral.
But you don’t have to get or be rich to live this mentality.
Every day I meet people in my business who are virtuous and un virtuous in this sense; those who understand and see value in the _honest_ labour of themselves and of others and those who do not.
For those who do not – their lives appear to me to primarily rotate around the concept of greed and self-centeredness. Such people are personally doomed.
They will never have enough money, you will always have too much and be undeserving of theirs and they will go to their graves believing they never had enough, neither trusting nor being trusted neither truly living or understanding who they are and why they are here.
We joke about the Zombie apocalypse. When will it happen? What will it look like? My assertion is the undead are here and living amongst us.
Isn’t it interesting that the book of Timothy does not tell us that “money” is the root of all evil but rather “the love of money” is? Such a subtle difference is wording. Such a profound difference in meaning.
Peace and Wisdom. Nanook
cassiefoley911 APRIL 5, 2015 AT 7:46 PM I believe it is a very personal thing. What it is for one maybe something entirely different for another. That is where we fall prey to prejudging.
I see money/wealth exactly the same as I do firearms. There is nothing wrong with firearms, it is in fact the people using those firearms that is the issue. It comes back to intentions, as in all things and it is important I believe that we don’t label anything or anyone. Cheers
Steve Henningsen (@Stevephenni) APRIL 5, 2015 AT 4:46 PM I’m always amazed by the passion and polarizing effects that just the mention of gold can bring forward.
JC, this is one of those rare times where I push back on you a bit. Your statement that gold “will not see $6,000 gold, or $10,000 gold. Period.” is rather silly, unless of coarse you have some insider knowledge or are simply clairvoyant.
While I do have my own biases (mostly from being a student of monetary history) I believe that the price of gold will be much higher for some period of time (I don’t speculate on how high) due to its current mispricing and have no idea what happens to its price thereafter. ‘
Every asset goes through booms and busts due to human nature. I have held gold since 2004 not to “get rich” but simply to preserve my wealth through the transition.
I do beleive it will be a part of whatever system comes next, for there is no conceivable way to me that people will have faith in an SDR, or any other scheme, if it is simply a bunch of fiat currencies cobbled together.
I wish commenters would stop discussing the “price” of gold, which brings no value to your excellent blog, and focus on the possible path instead.
I do agree that those that think they will get rich in gold, biotech stocks or any other asset that doesn’t involve actual work are simply fooling themselves. We are going into a period that as one analyst stated, “Those who lose the least win.”
JC Collins APRIL 5, 2015 AT 5:53 PM Steve, I respect your discourse as always friend. My statements on the valuation of gold are based on what I see as rationality and logic. As such, the thought of gold at the valuations some suggest does not jive for me. The world does not work that way, and there is no historical precedent in which we can reference such a dramatic upward move in gold. Interesting enough, there are many reference points for dramatic devaluations.
Steve Henningsen (@Stevephenni) APRIL 5, 2015 AT 7:49 PM Fair enough JC, but I would add that there has been no historical precedent for the massive global debt binge either. We are in uncharted monetary territory.